BILL NUMBER: AB 463	CHAPTERED  07/24/00

	CHAPTER   183
	FILED WITH SECRETARY OF STATE   JULY 24, 2000
	APPROVED BY GOVERNOR   JULY 21, 2000
	PASSED THE SENATE   JULY 6, 2000
	PASSED THE ASSEMBLY   JANUARY 26, 2000
	AMENDED IN ASSEMBLY   JANUARY 13, 2000
	AMENDED IN ASSEMBLY   JANUARY 3, 2000
	AMENDED IN ASSEMBLY   APRIL 13, 1999

INTRODUCED BY   Assembly Member Maldonado
   (Coauthor:  Assembly Member Knox)

                        FEBRUARY 16, 1999

   An act to amend Section 19104 of the Revenue and Taxation Code,
relating to taxation.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 463, Maldonado.  Franchise and income taxes:  deficiency
assessments.
   Existing franchise and income tax law provides for interest upon
deficiency assessments, and provides for the abatement of interest
under certain circumstances.
   This bill would revise and recast the circumstances under which
interest may be abated, and would allow taxpayers to combine certain
appeals, provide a specified limitation on the time for taxpayers to
appeal, and specify circumstances under which a request to abate
interest is deemed denied by the Franchise Tax Board, as provided.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 19104, as amended by Chapter 203 of the
Statutes of 1999, of the Revenue and Taxation Code is amended to
read:
   19104.  (a) Interest upon the amount assessed as a deficiency
shall be assessed, collected, and paid in the same manner as the tax
at the adjusted annual rate established pursuant to Section 19521
from the date prescribed for the payment of the tax or, if the tax is
paid in installments, from the date prescribed for payment of the
first installment, until the date the tax is paid.  If any portion of
the deficiency is paid prior to the date it is assessed, interest
shall accrue on that portion only to the date paid.
   (b) If the Franchise Tax Board makes or allows a refund or credit
that it determines to be erroneous, in whole or in part, the amount
erroneously made or allowed may be assessed and collected after
notice and demand pursuant to Section 19051 (pertaining to
mathematical errors), except that the rights of protest and appeal
shall apply with respect to amounts assessable as deficiencies
without regard to the running of any period of limitations provided
elsewhere in this part.  Notice and demand for repayment must be made
within two years after the refund or credit was made or allowed, or
during the period within which the Franchise Tax Board may mail a
notice of proposed deficiency assessment, whichever period expires
the later.  Interest on amounts erroneously made or allowed shall not
accrue until 30 days from the date the Franchise Tax Board mails a
notice and demand for repayment as provided by this subdivision.
   (c) (1) The Franchise Tax Board may abate all or any part of any
of the following :
   (A) Any interest on a deficiency or related to a proposed
deficiency to the extent that interest is attributable in whole or in
part to any unreasonable error or delay by an officer or employee of
the Franchise Tax Board (acting in his or her official capacity) in
performing a ministerial or managerial act.
   (B) Any interest on a payment of any tax described in Section
19033 to the extent that any delay in that payment is attributable to
an officer or employee of the Franchise Tax Board (acting in his or
her official capacity) being dilatory in performing a ministerial or
managerial act.
   (C) Any interest accruing from a deficiency based on a final
federal determination of tax, for the same period that interest was
abated on the related federal deficiency amount under Section 6404(e)
of the Internal Revenue Code, and the error or delay occurred on or
before the issuance of the final federal determination.  This
subparagraph shall apply to any ministerial act for which the
interest accrued after September 25, 1987, or for any managerial act
applicable to a taxable or income year beginning on or after January
1, 1998, for which the Franchise Tax Board may propose an assessment
or allow a claim for refund.
   (2) For purposes of paragraph (1):
   (A) Except as provided in subparagraph (C), an error or delay
shall be taken into account only if no significant aspect of that
error or delay can be attributed to the taxpayer involved and after
the Franchise Tax Board has contacted the taxpayer in writing with
respect to that deficiency or payment.
   (B) (i) Except as provided in subparagraph (D), after the
Franchise Tax Board mails its notice of determination not to abate
interest, a taxpayer may appeal the Franchise Tax Board's
determination to the State Board of Equalization  within the
following periods:
   (I) Thirty days in the case of any unpaid interest described under
paragraph (1).
   (II) Ninety days in the case of any paid interest described under
paragraph (1).
   (ii) The State Board of Equalization shall have jurisdiction over
the appeal to determine whether the Franchise Tax Board's failure to
abate interest under this section was an abuse of discretion, and may
order an abatement.
   (iii)  Except for subclauses I and II of clause (i), the
provisions of this subparagraph are operative for requests for
abatement of interest made on or after January 1, 1998.  The
provisions of subclauses I and II of clause (i) shall apply to
requests for abatement of interest made on or after January 1, 2001,
in accordance with paragraph (4).
   (C) If the Franchise Tax Board fails to mail its notice of
determination on a request to abate interest within six months after
the request is filed, the taxpayer may consider that the Franchise
Tax Board has determined not to abate interest and appeal that
determination to the board.  This subparagraph shall not apply to
requests for abatement of interest made pursuant to subparagraph (D).

   (D) A request for abatement of interest related to a proposed
deficiency may be made with the written protest of the underlying
proposed deficiency filed pursuant to Section 19041 or with an appeal
to the board under Section 19045 in the form and manner required by
the Franchise Tax Board.  The action of the Franchise Tax Board
denying any portion of the request for abatement of interest relating
to the proposed deficiency shall be considered as part of the appeal
of the action of the Franchise Tax Board on the protest of the
proposed deficiency.  If the taxpayer filed an appeal from the
Franchise Tax Board's action of the protest of a proposed deficiency
and the deficiency is final pursuant to Section 19048, the taxpayer
may not thereafter request an abatement of interest accruing prior to
the time the deficiency is final.  However, the taxpayer may
thereafter request an abatement pursuant to this section limited to
interest accruing after the deficiency is final.
   (3) The Franchise Tax Board shall abate the assessment of all
interest on any erroneous refund for which an action for recovery is
provided under Section 19411 until 30 days after the date demand for
repayment is made, unless either of the following has occurred:
   (A) The taxpayer (or a related party) has in any way caused that
erroneous refund.
   (B) That erroneous refund exceeds fifty thousand dollars
($50,000).
   (4) The amendments made to this subdivision by the act adding this
paragraph shall apply to requests for abatement of interest and
appeals made on or after January 1, 2001.
   (5) Except as provided in clause (iii) of subparagraph (B) of
paragraph (2), the amendments made by Chapter 600 of the Statutes of
1997 are operative with respect to taxable or income years beginning
on or after January 1, 1998.
